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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________
FORM 8-K
______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 9, 2016
______________________
ENCORE CAPITAL GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
______________________
Delaware
(State or Other Jurisdiction of Incorporation)
000-26489
(Commission
File Number)
48-1090909
(IRS Employer
Identification No.)

3111 Camino Del Rio North, Suite 103, San Diego, California
(Address of Principal Executive Offices)
92108
(Zip Code)
(877) 445-4581
(Registrant’s telephone number, including area code)
______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








Item 2.02.    Results of Operations and Financial Condition.

On November 9, 2016, Encore Capital Group, Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

The information in Item 2.02 of this Current Report on Form 8-K, including the information contained in Exhibit 99.1, is being furnished to the Securities and Exchange Commission pursuant to Item 2.02, and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by a specific reference in such filing.

Item 9.01.    Financial Statements and Exhibits.
Exhibit Number
Description
99.1
Press release dated November 9, 2016






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
ENCORE CAPITAL GROUP, INC.

 
 
Date: November 9, 2016
/s/ Jonathan C. Clark
 
Jonathan C. Clark
 
Executive Vice President, Chief Financial Officer and Treasurer






EXHIBIT INDEX
Exhibit Number
Description
99.1
Press release dated November 9, 2016










Exhibit
https://cdn.kscope.io/bbf45bdaab748d24952b6dc39657936b-encorelogoa10.jpg
 
Exhibit 99.1

Encore Capital Group Announces Third Quarter 2016 Financial Results

•
Deployments of $206 million worldwide included $142 million in the U.S.
•
Encore’s share of portfolio allowance charge was $37 million after tax
SAN DIEGO, November 9, 2016 -- Encore Capital Group, Inc. (NASDAQ: ECPG), an international specialty finance company providing debt recovery solutions for consumers across a broad range of assets, today reported consolidated financial results for the third quarter ended September 30, 2016.
“The U.S. market for charged off receivables continues to improve as stronger supply and lower prices contribute to increasingly favorable returns,” said Kenneth A. Vecchione, President and Chief Executive Officer. “Pricing leverage is shifting from sellers to buyers as supply increases and debt purchasers continue to demonstrate pricing discipline. We believe the better pricing environment, combined with benefits we’re seeing from our consumer-centric liquidation programs, will continue to drive higher returns in the U.S.”
“This quarter certain European pool groups incurred an allowance charge as near-term collections are now forecasted to be collected in later years.  Encore’s portion of this non-cash charge was $37 million after taxes. With the comprehensive review of all of our European pool groups completed, we are highly confident in our estimated remaining collections and the accounting curves that support them.”
Key Financial Metrics for the Third Quarter of 2016:
•
Investment in receivable portfolios was $206 million, including $142 million in the U.S., compared to $187 million deployed overall in the same period a year ago.
•
Gross collections declined 4% to $407 million, compared to $422 million in the same period of the prior year.
•
Total revenues were $179 million, compared to $279 million in the third quarter of 2015, with the difference primarily driven by a $94 million gross consolidated portfolio allowance charge, of which $43 million represents Encore’s share after adjusting for noncontrolling interest, or $37 million after tax.
•
Total operating expenses decreased 19% to $201 million, compared to $248 million in the same period of the prior year, primarily reflecting the benefits of strategic cost management programs and the impact of the CFPB settlement in the third quarter of 2015. Adjusted operating expenses increased 1% to $167 million, compared to $165 million in the same period of the prior year.
•
Adjusted operating expenses per dollar collected for the portfolio purchasing and recovery business, also known as cost-to-collect, was 41.1%, compared to 39.2% in the same period of the prior year. The increase reflected the impact of an $11.3 million adjustment to Cabot’s deferred court costs, of which $4.9 million represents Encore’s share after adjusting for noncontrolling interest, or $4.0 million after tax.
•
Adjusted EBITDA decreased 7% to $245 million, compared to $264 million in the same period a year ago, reflecting the adjustment to deferred court costs.
•
Total interest expense increased to $48.6 million, as compared to $47.8 million in the same period of the prior year, reflecting the financing of recent acquisitions and portfolio purchases.
•
GAAP loss from continuing operations attributable to Encore was $1.5 million, or $0.06 per fully diluted share, as compared to a loss of $13.2 million, or $0.52 per fully diluted share in the same period a year ago, reflecting the allowance charges for certain European pool groups in the third quarter of 2016 and the impact of the CFPB settlement in the third quarter of 2015.

Encore Capital Group, Inc.
Page 2 of 8



•
Adjusted income from continuing operations attributable to Encore was $3.6 million, compared to $32.2 million in the third quarter of 2015, with the decline mainly attributed to the portfolio allowance charges for certain European pool groups.
•
Adjusted income from continuing operations attributable to Encore per share (also referred to as Economic EPS) was $0.14, compared to $1.25 in the same period of the prior year. In the third quarter of 2016, Economic EPS was not adjusted for shares associated with Encore’s convertible notes. In calculating Economic EPS for the third quarter of 2015, 0.8 million shares associated with convertible notes that will not be issued but are reflected in the fully diluted share count were excluded for accounting purposes.
•
Estimated Remaining Collections (ERC) increased 1% to $5.73 billion, compared to $5.65 billion at September 30, 2015.
•
Available capacity under Encore’s revolving credit facility, subject to borrowing base and applicable debt covenants, was $176 million as of September 30, 2016, and total debt on a consolidated basis was $2.8 billion.

Conference Call and Webcast
Encore will host a conference call and slide presentation today, November 9, 2016, at 2:00 p.m. Pacific / 5:00 p.m. Eastern time, presenting and discussing the reported results.
 
Members of the public are invited to access the live webcast via the Internet by logging on at the Investor Relations page of Encore's website at www.encorecapital.com. To access the live, listen-only telephone conference portion, please dial (855) 541-0982 or (704) 288-0606.

For those who cannot listen to the live broadcast, a telephonic replay will be available for seven days by dialing (800) 585-8367 or (404) 537-3406 and entering the conference number 8533103. A replay of the webcast will also be available shortly after the call on the Company's website.

Non-GAAP Financial Measures
This news release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included adjusted income attributable to Encore and adjusted income attributable to Encore per share (also referred to as economic EPS when adjusted for certain shares associated with our convertible notes that will not be issued but are reflected in the fully diluted share count for accounting purposes) because management uses this measure to assess operating performance, in order to highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has included information concerning adjusted EBITDA because management utilizes this information, which is materially similar in calculation to a financial measure contained in covenants used in the Company’s revolving credit facility, in the evaluation of its operations and believes that this measure is a useful indicator of the Company’s ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. The Company has included information concerning adjusted operating expenses in order to facilitate a comparison of approximate cash costs to cash collections for the portfolio purchasing and recovery business in the periods presented. Adjusted income attributable to Encore, adjusted income attributable to Encore per share/economic EPS, adjusted EBITDA, and adjusted operating expenses have not been prepared in accordance with GAAP. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income, net income per share, and total operating expenses as indicators of the Company’s operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to

Encore Capital Group, Inc.
Page 3 of 8



similarly titled measures reported by other companies. The Company has attached to this news release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

About Encore Capital Group, Inc.
Encore Capital Group is an international specialty finance company that provides debt recovery solutions for consumers across a broad range of assets. Through its subsidiaries, Encore purchases portfolios of consumer receivables from major banks, credit unions and utility providers.

Encore partners with individuals as they repay their obligations, helping them on the road to financial recovery and ultimately improving their economic well-being. Encore is the first and only company of its kind to operate with a Consumer Bill of Rights that provides industry-leading commitments to consumers. Headquartered in San Diego, the company is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P Small Cap 600 and the Wilshire 4500. More information about Encore can be found at http://www.encorecapital.com. More information about the Company’s Cabot Credit Management subsidiary can be found at http://www.cabotcm.com. Information found on the Company’s website or Cabot’s website is not incorporated by reference.
 

Forward Looking Statements
The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “will,” “may,” “believe,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K and 10-Q, as they may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.

Contact:

Bruce Thomas
Vice President, Investor Relations
Encore Capital Group, Inc.
(858) 309-6442
bruce.thomas@encorecapital.com



FINANCIAL TABLES FOLLOW


Encore Capital Group, Inc.
Page 4 of 8



ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
(Unaudited)
 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
Cash and cash equivalents
$
157,672

 
$
123,993

Investment in receivable portfolios, net
2,397,831

 
2,440,669

Property and equipment, net
66,703

 
72,546

Deferred court costs, net
57,089

 
75,239

Other assets
206,403

 
148,762

Goodwill
819,785

 
924,847

Assets associated with discontinued operations
—

 
388,763

Total assets
$
3,705,483

 
$
4,174,819

Liabilities and equity
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
217,242

 
$
290,608

Debt
2,848,443

 
2,944,063

Other liabilities
27,718

 
59,226

Liabilities associated with discontinued operations
—

 
232,434

Total liabilities
3,093,403

 
3,526,331

Commitments and contingencies


 


Redeemable noncontrolling interest
33,755

 
38,624

Redeemable equity component of convertible senior notes
3,798

 
6,126

Equity:
 
 
 
Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding
—

 
—

Common stock, $.01 par value, 50,000 shares authorized, 25,532 shares and 25,288 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively
255

 
253

Additional paid-in capital
83,521

 
110,533

Accumulated earnings
597,247

 
543,489

Accumulated other comprehensive loss
(103,320
)
 
(57,822
)
Total Encore Capital Group, Inc. stockholders’ equity
577,703

 
596,453

Noncontrolling interest
(3,176
)
 
7,285

Total equity
574,527

 
603,738

Total liabilities, redeemable equity and equity
$
3,705,483

 
$
4,174,819

The following table includes assets that can only be used to settle the liabilities of the Company’s consolidated variable interest entities (“VIEs”) and the creditors of the VIEs have no recourse to the Company. These assets and liabilities are included in the consolidated statements of financial condition above.
 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
Cash and cash equivalents
$
55,158

 
$
50,483

Investment in receivable portfolios, net
1,038,119

 
1,197,513

Property and equipment, net
16,859

 
19,767

Deferred court costs, net
20,836

 
33,296

Other assets
58,146

 
31,679

Goodwill
616,859

 
706,812

Assets associated with discontinued operations
—

 
92,985

Liabilities
 
 
 
Accounts payable and accrued liabilities
$
89,056

 
$
142,375

Debt
1,591,403

 
1,665,009

Other liabilities
770

 
839

Liabilities associated with discontinued operations
—

 
58,923


Encore Capital Group, Inc.
Page 5 of 8



ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
Three Months Ended 
 September 30,
 
2016
 
2015
Revenues
 
 
 
Revenue from receivable portfolios, net
$
159,534

 
$
265,523

Other revenues
19,881

 
13,391

Total revenues
179,415

 
278,914

Operating expenses
 
 
 
Salaries and employee benefits
67,783

 
62,995

Cost of legal collections
56,932

 
58,760

Other operating expenses
24,131

 
22,217

Collection agency commissions
8,848

 
9,381

General and administrative expenses
34,871

 
86,789

Depreciation and amortization
8,032

 
8,043

Total operating expenses
200,597

 
248,185

(Loss) income from operations
(21,182
)
 
30,729

Other (expense) income
 
 
 
Interest expense
(48,632
)
 
(47,816
)
Other income (expense)
4,100

 
(924
)
Total other expense
(44,532
)
 
(48,740
)
Loss before income taxes
(65,714
)
 
(18,011
)
Benefit for income taxes
13,768

 
6,361

Loss from continuing operations
(51,946
)
 
(11,650
)
Income from discontinued operations, net of tax
—

 
2,286

Net loss
(51,946
)
 
(9,364
)
Net loss (income) attributable to noncontrolling interest
50,422

 
(1,595
)
Net loss attributable to Encore Capital Group, Inc. stockholders
$
(1,524
)
 
$
(10,959
)
Amounts attributable to Encore Capital Group, Inc.:
 
 
 
Loss from continuing operations
$
(1,524
)
 
$
(13,245
)
Income from discontinued operations, net of tax
—

 
2,286

Net loss
$
(1,524
)
 
$
(10,959
)
 
 
 
 
Earnings (loss) per share attributable to Encore Capital Group, Inc.:
 
 
 
 
 
 
 
Basic (loss) earnings per share from:
 
 
 
Continuing operations
$
(0.06
)
 
$
(0.52
)
Discontinued operations
$
—

 
$
0.09

Net basic loss per share
$
(0.06
)
 
$
(0.43
)
Diluted (loss) earnings per share from:
 
 
 
Continuing operations
$
(0.06
)
 
$
(0.52
)
Discontinued operations
$
—

 
$
0.09

Net diluted loss per share
$
(0.06
)
 
$
(0.43
)
 
 
 
 
Weighted average shares outstanding:
 
 
 
Basic
25,777

 
25,450

Diluted
25,777

 
25,450


Encore Capital Group, Inc.
Page 6 of 8



ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
 
Nine Months Ended 
 September 30,
 
2016
 
2015
Operating activities:
 
 
 
Net income
$
5,494

 
$
45,788

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Loss (income) from discontinued operations, net of income taxes
1,352

 
(5,827
)
Depreciation and amortization
26,128

 
24,058

Non-cash interest expense, net
28,557

 
25,529

Stock-based compensation expense
9,502

 
17,259

Gain on derivative instruments, net
(10,885
)
 
—

Deferred income taxes
(46,524
)
 
(257
)
Excess tax benefit from stock-based payment arrangements
—

 
(1,705
)
Loss on sale of discontinued operations, net of tax
1,830

 
—

Provision for (reversal of) allowances on receivable portfolios, net
86,777

 
(3,958
)
Changes in operating assets and liabilities
 
 
 
Deferred court costs and other assets
7,572

 
(31,347
)
Prepaid income tax and income taxes payable
(2,485
)
 
(49,431
)
Accounts payable, accrued liabilities and other liabilities
(24,146
)
 
38,364

Net cash provided by operating activities from continuing operations
83,172

 
58,473

Net cash provided by operating activities from discontinued operations
2,096

 
4,908

Net cash provided by operating activities
85,268

 
63,381

Investing activities:
 
 
 
Cash paid for acquisitions, net of cash acquired
(675
)
 
(236,214
)
Proceeds from divestiture of business, net of cash divested
106,041

 
—

Purchases of receivable portfolios, net of put-backs
(712,706
)
 
(549,957
)
Collections applied to investment in receivable portfolios, net
507,552

 
488,174

Purchases of property and equipment
(16,548
)
 
(15,754
)
Proceeds from derivative instruments, net
10,038

 
—

Net cash used in investing activities from continuing operations
(106,298
)
 
(313,751
)
Net cash provided by (used in) used in investing activities from discontinued operations
14,685

 
(41,154
)
Net cash used in investing activities
(91,613
)
 
(354,905
)
Financing activities:
 
 
 
Payment of loan costs
(3,750
)
 
(7,316
)
Proceeds from credit facilities
455,786

 
911,588

Repayment of credit facilities
(443,968
)
 
(471,610
)
Repayment of senior secured notes
(14,343
)
 
(11,250
)
Repayment of securitized notes
(935
)
 
(32,324
)
Repurchase of common stock
—

 
(33,185
)
Taxes paid related to net share settlement of equity awards
(4,113
)
 
(6,050
)
Excess tax benefit from stock-based payment arrangements
—

 
1,705

Proceeds from other debt
35,080

 
—

Other, net
(10,070
)
 
(5,703
)
Net cash provided by financing activities
13,687

 
345,855

Net increase in cash and cash equivalents
7,342

 
54,331

Effect of exchange rate changes on cash
(3,263
)
 
(3,274
)
Cash and cash equivalents, beginning of period
153,593

 
124,163

Cash and cash equivalents, end of period
157,672

 
175,220

Cash and cash equivalents of discontinued operations, end of period
—

 
31,825

Cash and cash equivalents of continuing operations, end of period
$
157,672

 
$
143,395


Encore Capital Group, Inc.
Page 7 of 8



ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Adjusted Income Attributable to Encore to GAAP Net Loss Attributable to Encore, Adjusted EBITDA to GAAP Net Loss, and Adjusted Operating Expenses Related to Portfolio Purchasing and Recovery Business to GAAP Total Operating Expenses
(In Thousands, Except Per Share amounts) (Unaudited)
 
Three Months Ended September 30,
 
2016
 
2015
 
$
 
Per Diluted
Share—
Accounting
 
Per Diluted
Share—
Economic
 
$
 
Per Diluted
Share—
Accounting
 
Per Diluted
Share—
Economic
GAAP net loss from continuing operations attributable to Encore, as reported
$
(1,524
)
 
$
(0.06
)
 
$
(0.06
)
 
$
(13,245
)
 
$
(0.52
)
 
$
(0.52
)
Effect of diluted potential shares excluded from loss per share calculation(1)
—

 
—

 
—

 
—

 
0.01

 
0.01

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
Convertible notes non-cash interest and issuance cost amortization
2,983

 
0.12

 
0.12

 
2,859

 
0.11

 
0.11

Acquisition, integration and restructuring related expenses
3,843

 
0.15

 
0.15

 
2,235

 
0.09

 
0.09

Settlement fees and related administrative expenses(2)
2,613

 
0.10

 
0.10

 
63,019

 
2.38

 
2.45

Amortization of certain acquired intangible assets(3)
529

 
0.02

 
0.02

 
—

 
—

 
—

Income tax effect of the adjustments(4)
(3,263
)
 
(0.13
)
 
(0.13
)
 
(22,268
)
 
(0.84
)
 
(0.87
)
Adjustments attributable to noncontrolling interest(5)
(1,568
)
 
(0.06
)
 
(0.06
)
 
(418
)
 
(0.02
)
 
(0.02
)
Adjusted income from continuing operations attributable to Encore
$
3,613

 
$
0.14

 
$
0.14

 
$
32,182

 
$
1.21

 
$
1.25

________________________
(1)
The shares used to calculate GAAP net loss per diluted share - accounting and GAAP net loss per diluted share - economic during the three months ended September 30, 2016 and 2015 exclude dilutive potential common shares because of their anti-dilutive effect.
(2)
Amount represents litigation and government settlement fees and related administrative expenses. For the three and nine months ended September 30, 2016 amounts consist of settlement and administrative fees related to certain TCPA settlements. For the three and nine months ended September 30, 2015, amounts relate to the consent order with the CFPB that we entered into in September 2015. We believe these fees and expenses are not indicative of ongoing operations and adjusting for these fees and expenses makes it easier to compare to prior periods, anticipated future periods, and our competitors’ results.
(3)
As we continue to acquire debt solution service providers around the world, the acquired intangible assets, such as trade names and customer relationships, have grown substantially, particularly in recent quarters. These intangible assets are valued at the time of the acquisition and amortized over their estimated lives. We believe that amortization of acquisition-related intangible assets, especially the amortization of an acquired company’s trade names and customer relationships, is the result of pre-acquisition activities. In addition, the amortization of these acquired intangibles is a non-cash static expense that is not affected by operations during any reporting period. As a result, the amortization of certain acquired intangible assets is excluded from our adjusted income from continuing operations attributable to Encore and adjusted income from continuing operations per share.
(4)
Each adjustment may occur in different jurisdictions with different marginal tax rates. The income tax effect of the adjustments is calculated based on the marginal tax rates of the jurisdiction in which a specific adjustment occurred.
(5)
Certain of the above pre-tax adjustments include expenses recognized by our partially-owned subsidiaries. This adjustment represents the portion of the non-GAAP adjustments that are attributable to noncontrolling interest.

Encore Capital Group, Inc.
Page 8 of 8



 
Three Months Ended 
 September 30,
2016
 
2015
GAAP net loss, as reported
$
(51,946
)
 
$
(9,364
)
Adjustments:
 
 
 
Income from discontinued operations, net of tax
—

 
(2,286
)
Interest expense
48,632

 
47,816

Benefit for income taxes
(13,768
)
 
(6,361
)
Depreciation and amortization
8,032

 
8,043

Amount applied to principal on receivable portfolios(1)
247,427

 
156,229

Stock-based compensation expense
633

 
5,156

Acquisition, integration and restructuring related expenses
3,843

 
2,235

Settlement fees and related administrative expenses(2)
2,613

 
63,019

Adjusted EBITDA
$
245,466

 
$
264,487

________________________
(1)
Amount represents collections from receivable portfolios that are not included in consolidated revenues as a result of accounting principles that require the application of such collections to amortize the principal of such receivable portfolios. We adjust for this amount because (a) the method is materially consistent with the calculation method contained in covenants used in our revolving credit and term loan facility and (b) it represents actual cash collections and we believe this measure is a useful indicator of our ability to generate cash collections in excess of operating expenses through the liquidation of our receivable portfolios.
(2)
Amount represents litigation and government settlement fees and related administrative expenses. For the three and nine months ended September 30, 2016 amount consists of settlement and administrative fees related to certain TCPA settlements. For the three and nine months ended September 30, 2015, amount relates to the consent order with the CFPB that we entered into in September 2015. We believe these fees and expenses are not indicative of ongoing operations and adjusting for these fees and expenses makes it easier to compare to prior periods, anticipated future periods, and our competitors’ results. Adjusting for these settlement and administrative fees is materially consistent with the calculation method contained in covenants used in our revolving credit and term loan facility.
 
Three Months Ended 
 September 30,
2016
 
2015
GAAP total operating expenses, as reported
$
200,597

 
$
248,185

Adjustments:
 
 
 
Stock-based compensation expense
(633
)
 
(5,156
)
Operating expenses related to non-portfolio purchasing and recovery business(1)
(26,446
)
 
(20,835
)
Acquisition, integration and restructuring related expenses
(3,843
)
 
(2,235
)
Settlement fees and related administrative expenses(2)
(2,613
)
 
(54,697
)
Adjusted operating expenses related to portfolio purchasing and recovery business
$
167,062

 
$
165,262

________________________
(1)
Operating expenses related to non-portfolio purchasing and recovery business include operating expenses from other operating segments that primarily engage in fee-based business, as well as corporate overhead not related to our portfolio purchasing and recovery business.
(2)
Amount represents litigation and government settlement fees and related administrative expenses. For the three and nine months ended September 30, 2016 amount consists of settlement and administrative fees related to certain TCPA settlements. For the three and nine months ended September 30, 2015, amount relates to the consent order with the CFPB that we entered into in September 2015. We believe these fees and expenses are not indicative of ongoing operations and adjusting for these fees and expenses makes it easier to compare to prior periods, anticipated future periods, and our competitors’ results. Adjusting for these settlement and administrative fees is materially consistent with the calculation method contained in covenants used in our revolving credit and term loan facility.